When Congress returns from the August recess next week, one prominent bill on the agenda will be the bailout for farmers who knew they would not be covered by government subsidies this year. The government-subsidized insurance program for cattle farmers expired a year ago, and like most prudent businessmen, they should have prepared to mitigate their risks and play like everyone else in the market. But they likely suspected that the politicians in Washington would bail them out anyway. As such, they did nothing to prepare for a potential drought (which is always a threat).
The Senate will likely vote on the $383 million bailout package (H.R. 6233), which retroactively covers cattle farmers…along with many other special interests that were not hit by the drought. The House already passed the bill immediately preceding the August break.
Through the entire debate over the bailout package, and the underlying farm/food stamp bill, which costs $957 billion, you will never read this headline: Farmers Expecting Record Incomes! Here is the latest report from the USDA Economic Research Service:
In current dollars (ignoring the effects of inflation), U.S. net farm income is forecast to exceed $122 billion in 2012 and net cash income is expected to exceed $139 billion, both record nominal values. The expected increase in income reflects large price-led gains in corn and soybean receipts, as well as large increases in crop insurance indemnities. Crop farm gains should be more than enough to offset livestock farmers’ higher feed expenses and a decline in sales of wholesale milk. Extreme hot and dry conditions in the Plains and Corn Belt are drastically cutting projected corn and soybean yields. With corn and soybean supplies for the 2012 marketing year expected to be the lowest in 9 years, prices are increasing dramatically, resulting in higher than expected 2012 calendar-year receipts for many crops. This chart is from the Farm Sector Income & Finances topic page on the ERS website, updated August 28, 2012.
Excuse me? So while farmers are receiving record indemnities from the existing insurance programs and are enjoying profits from the higher prices caused by the drought, we are supposed to expand those programs and pass an additional bailout package?
The real answer to lowering the cost of food on consumers is to eliminate the ethanol mandate, not to subsidize the farmers. That will certainly help the cattle farmers who are suffering from a shortage in corn feed.
Look, if we lack the will as a party to cut back on corporate subsidies for Big Ag, who in their right mind believes we will have the guts to cut back on individual welfare?
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